Among the most common investor goals, there is the goal of earning the highest possible interest on capital invested. Even for the most conservative of investors, there could be a decision to make between purely saving one’s capital (and thus, risk the capital becoming less valuable due to rising inflation) and exposing the capital to risk for the possibilities of a return.
Considering that inflation grew worse this past February amidst the growing crisis in Ukraine, in addition to a 40-year high for the most recent Consumer Price Index published by the U.S. Bureau of Labor Statistics – which measures the average change over time in the prices paid by urban consumers – navigating the global economic landscape as an investor seeking ways to earn interest while managing risk can be daunting, even for an institutional investor or corporate treasury seeking low-risk, highly-liquid investments that generate decent returns.
There are numerous options to consider when looking to earn interest on one’s money, and in this article we’ll discuss 5 of them: high-yield savings accounts, CD accounts, treasury bills, money market funds, and finally, the yield targeted through BitBull Capital’s Yield Fund.
High-Yield Savings Accounts
The average APY on traditional savings accounts in the U.S. is 0.07%. Alternatively, high-yield savings accounts enable faster growth of funds. Many of the best high-yield savings accounts are offered by online-only banks, the term “best” here defined by highest APY available. In comparison to the average traditional savings account APY, a high-yield savings account with Marcus by Goldman Sachs comes with a 0.50% APY, for example.
Being able to earn yield without the risk of losing one’s original investment can be appealing. A high-yield savings account provides this (although there is the variable of rising inflation), and although this type of account keeps one’s capital fairly liquid, it is worth noting that some of the best US-based APY-generating high-yield savings accounts limit the number of times one can withdraw funds each month, in accordance with Regulation D.
Overall, a high-yield savings account presents a fairly liquid investment of capital at a nominal interest rate, with a much higher APY than traditional savings accounts. A 3% yield even exists among the suite of high-yield savings account options.
Certificates of deposits, or CD accounts, are unique types of savings accounts that can be opened at many banks or credit unions. Unlike savings accounts, however, CD accounts require that funds be “locked up” for a specified period, until the money’s maturity date is reached. The longer the period, the higher the interest rate. Moreover, both the term length and the interest rate are typically fixed. A CD account’s terms can range from 3 months to even 5 years.
The interest rate set by the Federal Reserve can impact the rates available for CDs, with banks normally moving CD account rates in the same direction.
A 5-year CD can come with an APY north of 1.5%, while 1-year CDs can offer an APY around 1.0%. CDs with lesser terms naturally carry lower interest rates.
Furthermore, not all CD account rates are fixed, and some even allow for ongoing deposits into the account. This purely depends on the type of CD product it is and the institution offering it.
Treasury Bills, Notes & Bonds
Treasury Bills (or, T-bills) are short-term securities with a maturity date of one year or less. They are normally sold in $1,000 denominations. T-notes mature between 2 and 10 years. Treasury bonds (T-bonds) mature in 20 or 30 years and offer the highest interest rates. Both T-notes and T-bonds come with bi-annual interest payments. The general distinction between these is similar to that of CD accounts: the longer the term period, the higher the interest rate.
Given that bills are sold at a discount and are worth their face value at the time of the bill’s maturity date (i.e. a one-year $500 T-bill purchased for $450, and at maturity being worth $500), many investors look to Treasury interest rate movement to ascertain what’s ahead in the market, as Treasury yields are backed by the United States Treasury and represent the going rate for risk-free investment.
Money Market Funds
A money-market fund is a fixed-income mutual fund that invests in debt securities. They can fall into 3 categories – prime, government and municipal. Debt securities held by money market funds are required to have short maturity periods and high-level credit quality, among other requirements. Moreover, there are both retail and institutional prime and municipal money market funds available for investors.
It should be noted here that money market funds are different from money market accounts.
One of the differences is that a money market fund is an investment product, but a money market account is a bank deposit.
A typical annual return for a money market fund is between 1% and 2%.
The Yield Fund from BitBull Capital
From taking positions in early-stage crypto projects to stablecoin yield farming, there are a plethora of opportunities within the cryptocurrency market for investors looking to generate yield.
For those individuals managing cash or liquid investments – particularly at the sophisticated or institutional level – looking to further diversify with cryptocurrencies, there is a growing interest in leveraging stablecoin assets such as USDT, USDC and beyond.
With a target yield of 15-20% per year on the investment of stablecoin assets into decentralized finance (DeFi) products and through activities such as lending and staking, the Yield Fund here at BitBull Capital is designed to help corporate treasuries or simply those who do not want to take on the risk of volatile crypto assets to earn yield from assets tied to the US dollar. It’s with respect to the Yield Fund that our experience privately investing corporate treasury cash with solid returns, utilizing USDC, is most useful.
As always, every investor or investor group’s objectives ultimately determine the appropriate investment strategy to implement.
To learn more about Yield Fund, or any of our other funds here at BitBull Capital, you may schedule a call with us here.